Disclosure Statement
Operating Principles for Impact Management
International Finance Corporation
February 25, 2021
The International Finance Corporation (IFC) is a founding signatory to the Operating Principles
for Impact Management (the Principles). The Principles provide a reference point against which
the impact management systems of funds and institutions may be assessed. They draw onemerging best practices from a range of asset managers, asset owners, asset allocators, anddevelopment finance institutions.
This Disclosure Statement affirms that IFC’s core/client business, including (a) impact
management systems; (b) policies and practices; and (c) investment services (including debt,
equity, trade and supply chain finance, asset management, syndications, derivatives andstructured finance, and blended finance instruments) are managed in alignment with the
Principles. Total assets under management in alignment with the Principles is US$80,773
million1 as of June 30, 2020.2 3

Stephanie Von Friedeburg
IFC Interim MD/EVP
and COO

1

Includes the following amounts:─ Portfolio exposure (includes debt, equity, trade and supply chain finance, derivatives, and structured finance in
IFC’s own account investment portfolio; exposure is defined as the sum of the (i) committed exposure
for IFC’s debt investments, (ii) fair market value of IFC’s equity investments, and (iii) total undisbursed equity
commitments): $58,650 million as of 6/30/2020;
─ Syndications third-party investor portfolio (includes B Loans, agented parallel loans, Managed Co-Lending
Portfolio Program loans, A Loan participations, unfunded risk participations, and credit insurance policies):$16,161 million as of 6/30/2020;
─ IFC Asset Management Company (composed of equity assets under management): $4,317 million as of
6/30/2020; and─ Blended finance (blended finance resources applied to investment projects): $1,645 million, as of
6/30/2020.
2
Excluding liquidity management.
3
The sole purpose of this Disclosure Statement is to fulfill IFC’s obligations pursuant to Principle 9. This document
shall not constitute and should not be construed as an offer, solicitation or invitation to buy or sell any securities,
financial instruments or services whether described herein or otherwise, or as any prospectus or investment- related
advice in relation thereto, nor is it intended to form the basis of a decision to participate in any investment. IFC makes
no guarantee or other promise as to any outcomes, including any financial or development impact results that may beobtained from the practices disclosed in this statement. While past performance may be analyzed in this DisclosureStatement, past performance should not be considered indicative of future performance. Accordingly, IFC shall nothave any liability to any of the recipients of this Disclosure Statement, nor to any other party in connection with or
arising in any way from, or in relation to, the information or any opinions expressed in this Disclosure Statement, andIFC does not accept any responsibility whatsoever for any action taken, or omitted to be taken by any party on thebasis of any matter contained in, or omitted from, the Disclosure Statement.

Principle 1 – Define strategic impact objective(s), consistent with the investment strategy: The
Manager shall define strategic impact objectives4 for the portfolio or fund to achieve positive andmeasurable social or environmental effects, which are aligned with the Sustainable Development
Goals (SDGs), or other widely accepted goals. The impact intent does not need to be shared by
the investee. The Manager shall seek to ensure that the impact objectives and investment strategy
are consistent; that there is a credible basis for achieving the impact objectives through theinvestment strategy; and that the scale and/or intensity of the intended portfolio impact is
proportionate to the size of the investment portfolio.
•

IFC – a sister organization of the World Bank and member of the World Bank Group (WBG)– is the largest global development institution focused exclusively on the private sector indeveloping countries. The WBG has set two goals it aims to help the world achieve by 2030:
end extreme poverty and promote shared prosperity in every country.

•

Through direct investment services, IFC provides private sector solutions that lay thefoundation for sustainable and inclusive economic growth.

•

IFC formulates country strategies to define areas of focus and deployment of resources toaddress development challenges in individual countries. IFC also develops global sector
strategies to inform how the Corporation engages in specific sectors in general, which theninforms how IFC focuses on these sectors at the country level. Underlying these country andsector strategies are a suite of country and private sector diagnostics and analytical work,
which focuses on identifying constraints to private sector investment and operations.

•Throughout the investment decision-making process, the delivery of development impact is a
key factor in IFC’s project selection and design criteria5. Specifically, IFC’s development
impact rating system, the Anticipated Impact Measurement and Monitoring (AIMM) system,
helps IFC consider the quantum of impact expected from a prospective investment decisionin the context of the relevant development gap the country faces.

4

Impact objectives can be defined as the intended impact that contributes to financial, institutional, social,environmental, or other benefits to a society, community, or group of people via one or more investment. Adaptedfrom OECD-DAC (www.oecd.org/dac/).
5

See footnote 3.

2

Principle 2 – Manage strategic impact on a portfolio basis: The Manager shall have a process tomanage impact achievement on a portfolio basis. The objective of the process is to establish andmonitor impact performance for the whole portfolio, while recognizing that impact may varyacross individual investments in the portfolio. As part of the process, the Manager shall consider
aligning staff incentive systems with the achievement of impact, as well as with financial
performance.
•

IFC pursues a “portfolio approach” that guides project selection and design. The portfolio
approach allows IFC to achieve its development objectives and maintain financial
sustainability, recognizing possible trade-offs between these objectives across projects. The
AIMM system is an integral tool for IFC to pursue the portfolio approach.

•

IFC manages its performance through a corporate scorecard which is cascaded into
departmental scorecards and objectives for Vice Presidents, Directors, Managers, and staff.
The scorecard includes targets for portfolio financial and impact performance, the lattermeasured by average AIMM scores. Departmental awards are linked to the achievement ofscorecard targets. Corporate performance awards provide additional incentives for deliveringhigh-impact transactions.

•

To further align IFC’s investment processes with Principle 2, IFC rated a representative
sample of its portfolio using the AIMM system. By combining AIMM scores – whichmeasure impact – with financial return data, IFC will be better positioned to utilize an asset
allocation model, strengthening its capacity to pursue the portfolio approach.

Principle 3 – Establish the Manager’s contribution to the achievement of impact: The Manager
shall seek to establish and document a credible narrative on its contribution to the achievementof impact for each investment. Contributions can be made through one or more financial and/or
non-financial channels.6 The narrative should be stated in clear terms and supported, as much as
possible, by evidence.
•

IFC assesses the expected contribution of its investment operations to impact by screening
all investments through the AIMM impact assessment framework. AIMM scores are
considered alongside expected financial performance in investment decisions. AIMM
scores take into account contributions to both project impacts and market impacts, andconsider the contribution made by IFC’s financing and by IFC’s other roles in the project,including client engagement, financial mobilization and advisory services.

6

For example, this may include: improving the cost of capital, active shareholder engagement, specific financial
structuring, assisting with further resource mobilization, providing technical/market advice or capacity building to theinvestee, and/or helping the investee to meet higher operational standards.
7
See footnote 3.

3•Additionally, all IFC investment operations must demonstrate additionality7 which refers to theunique contribution that IFC brings to a private investment project that is not typically offered bysources of finance that pursue only commercial objectives. This additionality may take financial
and/or non-financial forms. Together with the assessment of potential impact through the AIMM
system, this establishes IFC’s contribution to the achievement of impact.

•

Additionality is a threshold condition for IFC involvement in a project, it is not a policy or an
objective, but rather a requirement embedded in Article III of IFC’s Articles of Agreement,
which states that “the Corporation shall not undertake any financing for which in its opinion
sufficient private capital could be obtained on reasonable terms.”8 9
Principle 4 – Assess the expected impact of each investment, based on a systematic approach:For each investment the Manager shall assess, in advance and, where possible, quantify theconcrete, positive impact11 potential deriving from the investment. The assessment should use asuitable results measurement framework that aims to answer these fundamental questions: (1)What is the intended impact? (2) Who experiences the intended impact? (3) How significant is
the intended impact?12 The Manager shall also seek to assess the likelihood of achieving theinvestment’s expected impact. In assessing the likelihood, the Manager shall identify thesignificant risk factors that could result in the impact varying from ex-ante expectations.
In assessing the impact potential, the Manager shall seek evidence to assess the relative size ofthe challenge addressed within the targeted geographical context. The Manager shall also
consider opportunities to increase the impact of the investment. Where possible and relevant for
the Manager’s strategic intent, the Manager may also consider indirect and systemic impacts.
Indicators shall, to the extent possible, be aligned with industry standards13 and follow bestpractice.14•

The AIMM system is IFC’s project impact assessment tool which allows IFC to estimate theexpected development impact of its interventions at their initial stage, when they are still being
developed.15 This approach gives IFC the capacity to set ambitious yet achievable targets,select projects with the greatest potential for development impact and financial sustainability,
and optimize project design.16

8

See: https://www.ifc.org/ArticlesOfAgreement
See footnote 3.
10
See footnote 3.
11
Impact is considered the material effect/s on people and the environment resulting from the investment, as
outlined in Principle 1. Impacts assessed under Principle 4 may also include positive ESG effects derived from theinvestment.
12
Adapted from the Impact Management Project (www.impactmanagementproject.com).
13
Industry indicator standards include HIPSO (indicators.ifipartnership.org/about/); IRIS (iris.thegiin.org); GIIRS (banalytics.net/giirsfunds); GRI (www.globalreporting.org/Pages/default.aspx); and SASB (www.sasb.org), among
others.
14
International best practice indicators include SMART (Specific, Measurable, Attainable, Relevant, and Timely),
and SPICED (Subjective, Participatory, Interpreted & communicable, Cross-checked, Empowering, and Diverse &disaggregated), among others.
15
See: https://www.ifc.org/AIMM
16
See footnote 3.
9

3

•

Each new IFC investment is assigned an ex-ante AIMM score that reflects the project’s
potential for delivering development outcomes. The assessment requires IFC investment
teams with support from dedicated sector economists to articulate the extent of thedevelopment challenge to be addressed, the associated intended impact of the proposed
investment, the parties that are affected by such impact, and the intensity of the effects thatflow from the intervention.

•

The AIMM system assesses impact along two dimensions: project- and market-level effects;
and assigns to each an estimate of the likelihood of achieving impact.

•

The AIMM impact assessments also take into consideration country and market context. IFC
situates all development impact claims against defined development gaps or stage of market
development (i.e., the relative size of the development challenge that IFC is seeking toaddress with its intervention). The overall potential impact assessment is anchored by thiscontext determination.

•

The AIMM system also connects IFC’s ex-ante assessments with a results measurement
system that tracks actual impact during implementation. By using project and market
indicators identified ex-ante, IFC measures progress against the achievement of project- andmarket-level claims.

5Principle 5 – Assess, address, monitor, and manage potential negative impacts of each
investment: For each investment the Manager shall seek, as part of a systematic and documented
process, to identify and avoid, and if avoidance is not possible, mitigate and manage
Environmental, Social and Governance (ESG)17 risks. Where appropriate, the Manager shallengage with the investee to seek its commitment to take action to address potential gaps incurrent investee systems, processes, and standards, using an approach aligned with goodinternational industry practice.18 As part of portfolio management, the Manager shall monitor
investees’ ESG risk and performance, and where appropriate, engage with the investee to address
gaps and unexpected events.
•

IFC’s Sustainability Framework19 articulates IFC’s approach to environmentally and sociallysustainable development and is an important component in the effort to achieve positive
development outcomes in IFC investment activities.

•

The framework includes a Sustainability Policy that specifies the role and responsibilities
assumed by IFC and eight Performance Standards (“PS”)20 that define IFC’s clients’
responsibilities for managing the environmental and social (E&S) risks of their operations.

•

It also includes the Access to Information Policy (“AIP”) describing IFC’s commitment totransparency and disclosure. In support of these policies, IFC’s environmental and social risk
management system includes guidance and procedures.

•

IFC undertakes E&S due diligence on all its investments, assessing the client’s ability andcommitment to achieve E&S outcomes consistent with the PSs over a reasonable period.

•

IFC uses a categorization system (e.g. A, B, C: F1, F2, F3) to reflect the potential magnitudeof E&S risks of its investments and to allocate resources and approval levels according torisk. E&S project due diligence is subject to multiple elements of quality control.

•

For financial institution (FI) investments, due diligence requires the review of the existing
portfolio and prospective business activities of its FI clients to identify those that could entail
serious E&S risks and defines requirements for managing them. IFC reviews theimplementation capacity of FI clients as well as their E&S management system.21•

Created in 1999, the Office of the Compliance Advisor Ombudsman (CAO) is the independent
recourse and accountability mechanism of the International Finance Corporation (IFC) andMultilateral Investment Guarantee Agency (MIGA) for social and environmental concerns. The
mandate of the CAO is to address complaints by people affected by IFC/MIGA supported projects ina manner that is fair, objective, and constructive, and to enhance the social and environmental
outcomes of projects in which those institutions play a role. 22

17

The application of good ESG management will potentially have positive impacts that may or may not be theprincipal targeted impacts of the Manager. Positive impacts resulting from ESG matters shall be measured andmanaged alongside with, or directly embedded in, the impact management system referenced in Principles 4 and18
Examples of good international industry practice include: IFC’s Performance Standards(https://www.ifc.org/performancestandards); IFC’s Corporate Governance Methodology.
(http://www.ifc.org/cgmethodology) , the United Nations Guiding Principles for Business and Human

6

Rights. (https://www.unglobalcompact.org/library/2); and the OECD Guidelines for Multinational
Enterprises. (http://mneguidelines.oecd.org/themes/human-rights.htm).
19
http://www.ifc.org/sustainabilityframework20
www.ifc.org/performancestandards
21
See footnote 3.
22https://www.ifc.org/wps/wcm/connect/corp_ext_content/ifc_external_corporate_site/about+ifc_new/accountabili
ty/tor-cao-vp

7

•

The results of IFC’s E&S due diligence at project appraisal are made publicly available in theform of an E&S Review Summary (ESRS). Where relevant, client agreed action plans toaddress the gaps between their plans and IFC requirements are also disclosed. These arereflected in an E&S Action Plan, which is monitored and progress reported on by the client.23•

Internally, category A and B investments (and F1, F2 for FIs) are scored at the end ofappraisal and then during supervision using the Environmental and Social Risk Rating(ESRR), an internal tool designed to indicate the project’s relative level of E&S risk. This
indicates the level of E&S risk management performance of IFC clients and updates this overtime. Portfolio performance is monitored and reported to senior management.

•

IFC’s Corporate Governance (CG) methodology considers a company’s commitment tocorporate governance, the structure and functioning of its board, its control environment, its
treatment of minority shareholders, and its transparency and disclosure. IFC recently updated
its CG Methodology to also include the governance of stakeholder engagement.

•

IFC’s CG due diligence focuses on these six key aspects of CG, and where concerns are
identified, a CG Action Plan is agreed to with the client. In most cases, CG diligence isconsidered by the investment team leading the transaction, with higher CG risk projects
benefiting from inclusion of a CG specialist on the investment team.

Principle 6 – Monitor the progress of each investment in achieving impact against expectations
and respond appropriately: The Manager shall use the results framework (referenced in
Principle 4) to monitor progress toward the achievement of positive impacts in comparison to the
expected impact for each investment. Progress shall be monitored using a predefined process forsharing performance data with the investee. To the best extent possible, this shall outline howoften data will be collected; the method for data collection; data sources; responsibilities for datacollection; and how, and to whom, data will be reported. When monitoring indicates that theinvestment is no longer expected to achieve its intended impacts, the Manager shall seek topursue appropriate action.24 The Manager shall also seek to use the results framework to capture
investment outcomes.25•

IFC’s results measurement system comprises four building blocks: diagnostics to inform
investment decisions, a rating tool – the AIMM system – to assess impact claims prior to
project approval, a monitoring system to measure progress against claimed effects, and anevaluation23

See footnote 3.
Actions could include active engagement with the investee; early divestment; adjusting indicators/expectations
due to significant, unforeseen, and changing circumstances; or other appropriate measures to improve theportfolio’s expected impact performance.
25
Outcomes are the short-term and medium-term effects of an investment’s outputs, while the outputs are theproducts, capital goods, and services resulting from the investment. Adopted from OECD-DAC(www.oecd.org/dac/).
24

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mechanism to promote learning and accountability. While IFC has employed a range oftools to measure impact through the years, development impact has always been at the centerof its business.
•

IFC uses monitoring indicators that are aligned with indicator usage practices andperformance metrics catalogued by the Harmonized Indicators for Private Sector Operations(HIPSO) and IRIS – to measure the development results of IFC’s investment services.

•As part of its investment service agreements with clients, IFC outlines data collection,
methodologies, and responsibilities prior to the beginning of supervision activities andrequires that its clients report on key monitoring indicators each year. This helps IFC reporton its own performance in ways that reinforce public trust and expand IFC’s “license tooperate”.

•

Changes in project ratings inform investment managers of progress in deliveringdevelopment outcomes. Portfolio officers and managers, through periodic client visits, assess
progress against development outcomes and work with clients to take remedial action incases where development outcomes are at risk.

•

In 2020, IFC unified its ex-ante project rating and results measurement system byreplacing DOTS with AIMM monitoring.

Principle 7 – Conduct exits considering the effect on sustained impact: When conducting an
exit,26 the Manager shall, in good faith and consistent with its fiduciary concerns, consider theeffect which the timing, structure, and process of its exit will have on the sustainability of the
impact.
•

IFC considers the effect on maintaining development impact when making exit decisions in
its equity portfolio. This can affect the timing, structure, and choice of who to sell to. Most
debt and guarantee investments are self-liquidating without exit decisions.27•

IFC documents equity exit decisions through sales memoranda, which provide rationales forexits.28

26

This may include debt, equity, or bond sales, and excludes self-liquidating or maturing instruments.
See footnote 3.
28
See footnote 3.
27

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Principle 8 – Review, document, and improve decisions and processes based on the achievementof impact and lessons learned: The Manager shall review and document the impact performanceof each investment, compare the expected and actual impact, and other positive and negative
impacts, and use these findings to improve operational and strategic investment decisions, aswell as management processes.
•

The WBG entities, including IFC and the Independent Evaluation Group (IEG)29 havedeveloped an evaluation framework which stipulates the role of independent and selfevaluations to inform operational strategy and policy.

•

IFC conducts mandatory self-evaluations on a representative sample of investment andadvisory operations once they have reached operational maturity (or closure in the case ofadvisory operations). These self-evaluations are done typically five years following
approval and are validated by IEG. The aggregate results are reported to the Board annuallyand disclosed publicly.

•

IEG undertakes fully independent evaluations of WBG operations30, policies, and strategies,
and reports directly to the Board of Executive Directors. These IEG evaluations may bearound broad development themes, strategies, specific sectors, or specific mandates that the
WBG entities are charged with delivering. The evaluations include recommendations, forwhich Management develops and commits to an action plan, which is monitored on anannual basis.

•

In addition, IFC also conducts demand-driven evaluations to fill knowledge gaps related toassessment of project performance, provide strategic insights to management and/or to meetdemands of external stakeholders for performance evaluation. IFC is updating its evaluation
strategy in line with the WBG Principles on Evaluation Principles on Evaluation and plans
to introduce more formality and rigor in the process of selecting evaluation topics and the
conduct and review of these evaluations. Demand-driven evaluations are conductedaccording to principles designed to ensure independence, particularly when they are
conducted primarily for external stakeholders such as with donors who have provided funds
for advisory programs or blended finance.

29
30

http://ieg.worldbankgroup.org
See footnote 3.

10

Principle 9 – Publicly disclose alignment with the Principles and provide regular independent
verification31 of the alignment: The Manager shall publicly disclose, on an annual basis, thealignment of its impact management systems with the Principles and, at regular intervals, arrange
for independent verification of this alignment. The conclusions of this verification report shallalso be publicly disclosed. These disclosures are subject to fiduciary and regulatory concerns.
•

This Disclosure Note re-affirms the alignment of IFC’s procedures with the Principles andwill be updated annually.

•

The independent assurance report on the alignment of IFC with the Operating Principles for
Impact Management will be made available in the first quarter of 2021 athttps://www.ifc.org/DevelopmentImpact/OPIM. The verification will be replicated every
year.

•

In addition, as part of its annual reporting practices, IFC seeks both an independent
assessment of the effectiveness of its impact measurement approach and an independent
verification of the resulting impacts achieved. The conclusions of the auditor are disclosed in
IFC’s Annual Report (see: https://www.ifc.org/AnnualReport).

•

Information on the current independent verifier is as follows:
Name and Address:

EY & AssociésTour First 1 place des Saisons TSA 14444
92037 Paris La Défense Cedex France

Qualifications:“EY is a global leader in assurance, tax, transaction and advisory
services. The insights and quality services we deliver help build
trust and confidence in the capital markets and in economies theworld over. We develop outstanding leaders who team to deliveron our promises to all of our stakeholders. In so doing, we play a
critical role in building a better working world for our people, for
our clients and for our communities. EY refers to the globalorganization, and may refer to one or more, of the member firms of
Ernst & Young Global Limited, each of which is a separate legal
entity. Ernst & Young Global Limited, a UK company limited byguarantee, does not provide services to clients. Information about
how EY collects and uses personal data and a description of therights individuals have under data protection legislation areavailable via ey.com/privacy. For more information about ourorganization, please visit ey.com.”

Most Recent Review:

October 4th , 2019

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The independent verification may be conducted in different ways, i.e., as part of a financial audit, by anindependent internal impact assessment committee, or through a portfolio/fund performance evaluation. The
frequency and complexity of the verification process should consider its cost, relative to the size of the fund or
institution concerned, and appropriate confidentiality.

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Next Planned Review:

February 2021